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Chapter 7: Business Marketing

Key Concepts:

Terms in this set (10)

The main differences between business and consumer markets are summarized on this slide.

The first characteristic demand is described on the next slide.

-Purchase volume: Business customers buy in larger quantities than consumers.

-Number of customers: Business marketers have fewer customers than consumer marketers. An advantage is that it is easier to identify buyers, monitor customer needs, and build personal relationships. A disadvantage is that each customer becomes crucial, especially for those manufacturers who have only one customer.

-Location of buyers: Business customers are more geographically concentrated than consumers.

-Distribution structure: Business products typically have shorter channels of distribution, and direct channels are common. On the other hand, consumer products pass through a distribution system that may include the producer, the wholesaler(s), and the retailers.

-Nature of buying: More people are involved in a business market purchase decision than in a consumer purchase. Representatives from quality control, marketing, finance, and purchasing may be grouped in a buying center.

-Nature of buying influence: Typically, more people are involved in a single business purchase decision than in a consumer purchase.

-Type of negotiations: Negotiation is more common in business marketing decisions and may take months to work out the final contracts.

-Use of reciprocity: Business purchasers often choose to buy from their own customers. It is not unethical or illegal unless the exchange is coerced.

-Use of leasing: Businesses commonly lease expensive equipment to reduce capital outflow, keep state of the art products, and gain tax advantages.

-Primary promotional method: Business marketers emphasize personal selling, especially for expensive, custom-designed products.

See slide #7
1. Major equipment: capital goods such as large or expensive machines, airplanes, buildings. Depreciated over time, often custom-designed. Personal selling is an important marketing strategy.

2. Accessory equipment: Less expensive and shorter-lived than major equipment, includes fax machines, personal computers, power tools. Often charged as an expense. Often standardized and purchased by more customers.

3. Advertising is an important promotional tool.
Raw materials: Unprocessed products, such as minerals, timber, wheat, corn, fish. Become part of finished products. Personal selling is the marketing mix component used, distribution channels usually direct from producer to business user.

4. Component parts: Finished items ready for assembly or that need very little processing. Examples are tires and electric motors. Two important markets for component parts: original equipment manufacturer (OEM) and replacement market.

5. Processed materials are used directly in manufacturing other products. Sheet metals, chemicals, and lumber. Do not retain their identity in final products. Price and service are important factors in choosing a supplier.

6. Supplies are consumable items that do not become part of the final product. Short lived and inexpensive. Generally fall into categories of maintenance, repair, or operating supplies (MRO), and include such items as detergents, pencils, paper, etc.

7. Business services are expense items that do not become part of the final product. This includes janitorial, advertising, legal, management consulting, marketing research, and maintenance services.